After making the initial decision to carry on business through a corporation, owners must decide whether to incorporate in Ontario or federally. Ontario corporations are governed by the Ontario Business Corporations Act (OBCA) and federal corporations governed by the Canada Business Corporations Act (CBCA). While the two statutes are fairly similar, there are a few differences that should be considered before making the decision.
Ontario corporations are more expensive to start up, but federal corporations are generally more expensive over the long run. It costs $300 (+ service fees) to incorporate electronically in Ontario; $200 to incorporate federally. However, unlike their provincial counterparts, federal corporations are also faced with a $20 annual filing fee. If you’re planning on operating under a corporate name, rather than with a numbered company, a NUANS report is required for both corporations and will cost approximately $75.
Head Office and Directors’ Meetings
Ontario corporations must have a head office in Ontario and must hold a majority of their meetings in Canada. Federal corporations can have their head office anywhere in Canada and are not required to hold their meetings in a particular jurisdiction.
Carrying on Business
A federal corporation has the right to use its name and carry on business in all provinces. Although the registration requirements vary, a federal corporation can carry on business in Ontario with minimal filing requirements – it has to file a “Form 1”, but does not have to register under the Extra-Provincial Corporations Act.
An Ontario corporation, on the other hand, must obtain a license under the extra-provincial corporations laws of another province, if it would like to carry on business there. The license may not be granted if its name is not acceptable in that province.
The final consideration is prestige. Federal corporation are generally thought to be more prestigious than provincial corporations. This is primarily important for corporations carrying on business internationally with individuals who are unfamiliar with Canada’s legal regime.
Based on the above, it is fair to say that those planning on carrying on business inter-provincially or internationally should give serious consideration to incorporating federally. As always, consult a professional before making this decision as everyone’s circumstances vary.